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Watchdog tells insurers to pay out on Covid claims as soon as possible

Michael O'Dwyer
·2-min read
A woman wearing a surgical face mask walks passed closed shops 
A woman wearing a surgical face mask walks passed closed shops

The City regulator has warned insurers to pay out on valid claims as soon as possible following the High Court’s ruling this week on whether Covid-related losses are covered by business interruption insurance. 

Chris Woolard, interim chief executive of the Financial Conduct Authority (FCA), wrote to insurance bosses on Friday demanding the swift payment of claims in cases where the court’s decision has clarified whether cover should be provided. 

The watchdog warned insurers not to create further barriers or delays for firms seeking payments. 

Companies buy business interruption to cover losses if they are forced to shut but insurers argued that losses caused by the pandemic were excluded under most contracts.

The FCA brought the legal action on behalf of policyholders against eight insurers in order to clarify key areas of dispute that are estimated to affect 370,000 businesses and more than 60 insurers. 

FCA insurance test case
FCA insurance test case

Judges ruled in favour of policyholders on some issues and sided with insurers on others leaving many cash-strapped businesses uncertain as to whether they will receive payouts. 

Both the FCA and the insurers involved are reviewing the judgment and could seek to appeal parts of the judges’ findings, further delaying payments to businesses. 

For claims affected by an appeal, insurers should be ready to pay as soon as possible once the appeal is concluded, Mr Woolard said. 

Mr Woolard told insurers they must write to affected customers within a week to explain the next steps. 

“Where we see that insurers are not meeting the expectations set out here, we will use the full range of our regulatory tools and powers to ensure they do so,” Mr Woolard said in a Dear CEO letter. 

The FCA will continue to co-ordinate with the Financial Ombudsman Service, which also adjudicates on complaints against financial services companies, he added.